GRAT
Grantor transfers assets to irrevocable trust, retains fixed annuity for a term; remainder passes to heirs. Transfers appreciation above IRS hurdle rate with minimal gift tax if assets outperform.
| Facet | Detail |
|---|---|
| Also called | Grantor retained annuity trust |
| A-B / A-B-C role | None |
| When created | During life |
| Revocable | No |
| Inter vivos / testamentary | Inter vivos |
| Typical beneficiaries | Children or remainder heirs |
| Primary purpose | Transfer appreciation with low taxable gift |
| Marital deduction | No |
| Uses estate exclusion | Taxable gift is remainder value at creation (often near zero) |
| In survivor's estate | Assets return to estate if grantor dies during term |
| Basis step-up | Carryover to trust; no step-up on gift |
| Income tax | Grantor trust — grantor pays tax |
| Crummey powers | No |
| GST / dynasty | GST on remainder if skip persons |
| Spendthrift | For remainder beneficiaries after term |
| See-through (IRA) | Not used |
| Key tradeoff | Low gift tax on upside vs mortality risk during annuity term |